One of the great debates in health care is about who pays the bill. Free-market advocates think that if consumers were more involved in paying for the cost of medical care, they’d be more judicious shoppers and help to reduce the rate of medical inflation. Single government payer system advocates prefer that employers and the government pick up more of the tab, which shields consumers from the actual costs of care, to expand coverage to more citizens.

Whatever side of the debate you’re on, we’re already beginning to see the effect of medical cost shifting to consumers with decreased demand for most medical services. It appears that insured Americans are using fewer medical services as they bear the cost of care more directly. Consequently, average wait times to see the doctor may be decreasing, although access in under-served areas and to certain specialists may remain restricted.

A 2008 American Hospital Association study released found that about one-third of hospitals had seen either a moderate or significant decrease in elective procedures in the previous three months. Some states like New Jersey and Georgia reported a 50% decrease. Ambulatory surgical centers who had witnessed substantial growth during the previous decade were reporting actual declines in procedures for the first time.

The drop in health care usage has been observed across the board. Insurers, testing laboratories, hospitals, drug stores and doctor’s offices all report a decline in demand over the past year. Cosmetic surgeons have been particularly hit hard. The American Society for Aesthetic Plastic Surgery found that business was down by as much as 30% in some practices.

In a poll of surgeon members of the American Society of Plastic Surgeons, 62% reported a decrease in overall cosmetic procedures during the first half of 2008 compared to the year before. Patients are opting for less invasive and less alternatives, such as Botox and wrinkle fillers, until the economic outlook improves.

Why the decline? First, as more Americans lose their jobs and health insurance, they’re more likely to postpone non-discretionary doctors’ visits. This happened during previous recessions, but may be more pronounced this time around.

Rising premiums have also driven more Americans to purchase high-deductible health plans. Around 18 million bought such high-deductible insurance plans this year, compare with 13 million last year. These plans require enrollees to bear more of the cost of care up front in return for lower premiums compared to lower deductible plans.

Consequently, patients with such plans are more likely to be cost-conscious about health care expenditures when they’re responsible for the bulk of initial costs. What’s not clear is whether such cost-shifting will result in poorer health outcomes or simply more economical purchasing behavior. The jury is out on that one.

So, who pays?

In the end, we all pay the health care bill in one form or another. This happens through increased premiums, co-payments and deductibles, or through increased taxes or rising cost of goods and services. What the current data suggest is that giving consumers a stake in health care expenses causes them to cut back on usage of medical services. Much of this is for non-essential, elective services, but time will tell if they’re cutting back on essential services too.